Controlling Process

MCA 2nd Sem

5 Steps In Control Process

1. Fixing the Control Standards / Objectives / Targets A standard is a criterion (base) which is used to measure the performance of the subordinates. Standards may be of two types, i.e. Quantitative Standards and Qualitative Standards. Quantitative Standard can be easily defined and measured. For e.g. number of products, number of customers, cost, net profit, time limits, etc.

Qualitative Standard
Qualitative Standard cannot be easily defined and measured. For e.g. measurement of morale, measurement of job satisfaction, measurement of effect of a training program, advertisement program, etc. The standards should be as clear as possible. It should be easily understood by both superiors and subordinates. The responsibility of each individual should also be clearly defined i.e. everyone should be responsible for achieving a particular goal, objective, target, etc. For e.g. The marketing department fixes a standard - "We will sell 2,000 units of product X in one month". So here the standard is 2,000 units.

2. Measuring the Actual Performances

After establishing the standards, the subordinates should be provided with all the resources for performing the job. They should be properly directed and motivated to perform the job. Similarly, they should be properly supervised. If the subordinated come under Theory X they require maximum supervision. However, if they come, under Theory Y then they require minimum supervision. After they complete the job their performance should be carefully measured. There are many traditional and modern techniques for measuring the performances of subordinates. For e.g. After one month, the marketing department sold only 10,000 units of product X. So, their actual

3. Comparison
The actual performances of the subordinates are compared with established standards, and then the deviations are found out. The deviations which are found out may be positive or negative. Positive Deviation means that the actual performances are better than the established standards. Positive deviations should be appreciated. Negative Deviation means that the actual performance is less than the established standards. The management should pay special attention to the negative deviation. They should find out the causes of negative deviations. For e.g. 10,000 units (Standard) - 9,000 units (Actual Performance) = 1,000 units (Negative Deviation).

4. Corrective Action
After finding out the negative deviations and their causes, the managers should take steps to correct these deviations. Corrective actions should be taken promptly. Corrective action may include, changing the standards, providing better motivation, giving better training, using better machines, etc. The management should take essential steps to prevent these deviations in the future. For e.g. The cause of the negative deviation was less advertising and untrained salesmen. So, the company must spend reasonable money on advertising and training.

5. Follow-up

After taking corrective action, the management must do a follow-up. Follow-up is done to find out whether the corrective actions are taken properly. It also finds out whether the deviations and their causes are removed. If follow-up is done properly, then the actual performance will be equal to or better than the established standards.

Advantage of controlling
1.Control improves Goodwill
Quality control improves the quality of the products. Cost control decreases the cost of the products. Therefore, the organization can supply good quality products at lower prices. This increases the goodwill of the organization 2. Control minimizes Wastage Control helps to reduce the wastage of human, material and financial resources. This increases the profits of the organization. 3. Control ensures optimum utilisation of resources Control helps the organization to make optimum utilization of the available resources. This also increases the profit of the organization.

Advantage of controlling
4. Control helps to fix responsibility Control helps to fix responsibility of a particular job on a particular person or a particular department. So, if there are any mistakes then a particular person or a particular department will be held responsible for it. 5. Control guides operations Control fixes certain standards. All the work has to be done according to these standards. So control, acts like a traffic signal. It guides all the operations of the organisation in the right direction. 6. Control motivates employees In control, the employees' performances are evaluated regularly. Those who show good performances are rewarded by giving them promotions, cash prizes, etc. This motivates the employees to work hard, and it also improves their morale.

Advantage of controlling
7. Control minimizes deviations Control minimizes the deviations between a planned performance and actual performance. 8. Control facilitates Delegation Control helps the superiors to evaluate the work of their subordinates. So, the superior can concentrate on the very important work, and they can delegate the less important work to their subordinates. Thus, it facilitates delegation. 9. Control facilitates Co-ordination Control facilitates co-ordination between the different departments of the organization. Whenever, there are any deviations, different departments come together to take collective and corrective steps.

Advantage of controlling
10. Control increases efficiency Efficiency is the relation between returns and cost. If there is a high return at low cost then there is efficiency and vice-versa. Control leads to high returns and low cost. Therefore, it increases efficiency.

10 Types of Control Techniques

1. Direct Supervision and Observation 'Direct Supervision and Observation' is the oldest technique of controlling. The supervisor himself observes the employees and their work. This brings him in direct contact with the workers. So, many problems are solved during supervision. The supervisor gets first hand information, and he has better understanding with the workers. This technique is most suitable for a small-sized business.

2. Financial Statements All business organizations prepare Profit and Loss Account. It gives a summary of the income and expenses for a specified period. They also prepare Balance Sheet, which shows the financial position of the organization at the end of the specified period. Financial statements are used to control the organization. The figures of the current year can be compared with the previous year's figures. They can also be compared with the figures of other similar organisations.

Ratio analysis can be used to find out and analyse the financial statements. Ratio analysis helps to understand the profitability, liquidity and solvency position of the business.

3. Budgetary Control A budget is a planning and controlling device. Budgetary control is a technique of managerial control through budgets. It is the essence of financial control. Budgetary control is done for all aspects of a business such as income, expenditure, production, capital and revenue. Budgetary control is done by the budget committee. 4. Break Even Analysis Break Even Analysis or Break Even Point is the point of no profit, no loss. For e.g. When an organization sells 50K cars it will break even. It means that, any sale below this point will cause losses and any sale above this point will earn profits. The Break-even analysis acts as a control device. It helps to find out the company's performance. So the company can take collective action to improve its performance in the future. Break-even analysis is a simple control tool.

5. Return on Investment (ROI) Investment consists of fixed assets and working capital used in business. Profit on the investment is a reward for risk taking. If the ROI is high then the financial performance of a business is good and vice-versa. ROI is a tool to improve financial performance. It helps the business to compare its present performance with that of previous years' performance. It helps to conduct inter-firm comparisons. It also shows the areas where corrective actions are needed.
6. Management by Objectives (MBO) MBO facilitates planning and control. It must fulfill following requirements Objectives for individuals are jointly fixed by the superior and the subordinate. Periodic evaluation and regular feedback to evaluate individual performance. Achievement of objectives brings rewards to individuals.

7. Management Audit Management Audit is an evaluation of the management as a whole. It critically examines the full management process, i.e. planning, organizing, directing, and controlling. It finds out the efficiency of the management. To check the efficiency of the management, the company's plans, objectives, policies, procedures, personnel relations and systems of control are examined very carefully. Management auditing is conducted by a team of experts. 8. Management Information System (MIS) In order to control the organization properly the management needs accurate information. They need information about the internal working of the organization and also about the external environment. Information is collected continuously to identify problems and find out solutions. MIS collects data, processes it and provides it to the managers. MIS may be manual or computerized. With MIS, managers can delegate authority to subordinates without losing control.

9. PERT and CPM Techniques Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) techniques were developed in USA in the late 50's. Any program consists of various activities and sub-activities. Successful completion of any activity depends upon doing the work in a given sequence and in a given time. CPM / PERT can be used to minimize the total time or the total cost required to perform the total operations. Importance is given to identifying the critical activities. Critical activities are those which have to be completed on time otherwise the full project will be delayed. So, in these techniques, the job is divided into various activities / subactivities. From these activities, the critical activities are identified. More importance is given to completion of these critical activities. So, by controlling the time of the critical activities, the total time and cost of the job are minimized. 10. Self-Control Self-Control means self-directed control. A person is given freedom to set his own targets, evaluate his own performance and take corrective measures as and when required. Self-control is especially required for top level managers because they do not like external control. The subordinates must be encouraged to use self-control because it is not good for the superior to control each and everything. However, self-control does not mean no control by the superiors. The superiors must control the important activities of the subordinates.